Transcript WACUBO BMI current issues 2004

Current Issues in Business
& Administrative Operations
2005 WACUBO Annual Meeting
James E. Morley, Jr., President & CEO
National Association of College and
University Business Officers (NACUBO)
What we’ll cover today:
• Legislative Issues
• Tax and nonprofit orgs
• Budget and HEA Reauthorization
• Sarbanes-Oxley
• Regulatory Issues
NACUBO Advocacy Priorities
• Special focus this year on three areas:
– Proactive approach to possible application of
Sarbanes-Oxley Act provisions to nonprofits
– Provide leadership on nonprofit governance
and accountability issues in Congress
– Develop resources for and information sharing
between institutions confronted with requests
for payments in lieu of taxes (PILOTs).
Legislative Issues: Oversight
of Charities
• Several committees are actively looking at
issues impacting tax-exempt organizations:
– Senate Finance Committee: engaged in
systematic review of charities
• White paper with numerous proposals June 2004
• Joint Committee on Taxation: looking at options
for improving tax compliance and increasing
revenue
• released a report in January 2005
– House Ways and Means Committee: recent
hearings on reform of tax-exempt organizations
Proposals of most interest or concern:
• Eliminate tuition reduction under section 117(d) for
employees of colleges and universities
• Limit student FICA exception to codify the recently
finalized regulations and restrict applicability for students
whose earnings exceed an annual dollar limit
• Require public disclosure of 990-T (UBIT) and
certification by an independent auditor of income and
expense allocations to UBIT
• Limit charitable contributions of property to lesser of
donor’s basis or fair market value for all in-kind property,
including capital property
• Extend Medicare payroll tax to all state government
employees …(cont.)
Legislative Issues: Oversight
of Charities
• Eliminate advance refunding of government and
501(c)(3) bonds
• Combine education tax credits and above-the-line
deduction into a single credit that would apply on a
per-student basis to qualified undergraduate and
graduate education expenses
• And, a couple that we like:
• Permit tax-free IRA rollovers to charities after
reaching a certain age (65 in President’s budget
proposal)
• Eliminate $150 million cap on 501(c)(3) tax-exempt
bonds
Legislative Issues: Oversight
of Charities
• NACUBO has joined with ACE to lead the
higher education community’s advocacy
efforts related to these tax proposals. Our
objectives:
– Bring together associations + institutions
interested in building consensus on key
issues
– Facilitate discussions and tax advocacy work
on targeted issues
– Form a central point for information delivery,
discussions, development of talking points
Legislative Issues:
FY06 Budget
FY06 Budget and Appropriations
• President’s budget, released in early February,
serves as the administration’s roadmap for
appropriations and reauthorization of the Higher
Education Act
• Deficit and need to rein in costs colors
everything
• Many of the President’s proposals would
require changes to the HEA
• Education slated for more program eliminations
than any other functional area
Legislative Issues:
FY06 Budget
President’s Budget Proposal (continued):
• Proposed eliminations:
• Perkins Loan program, including recall of existing
federal Perkins revolving funds
• LEAP
• GEAR UP
• Byrd Honors and various other scholarship programs
• Funding cuts:
• TRIO
• FIPSE
Legislative Issues:
FY06 Budget
President’s Budget Proposal (continued):
Major new proposals include:
• Increasing maximum Pell by $100/year for next 5 years
• Increasing subsidized loan limits to $3,500 for first-year students,
$4,500 for second-year, and $12,000 annually for graduate
students.
• Replacing fixed-rate student loan consolidation with variable rate
loans.
• A number of changes to the loan programs intended to save
federal $$
• Making Pell Grants available year-round for students at eligible
institutions.
• Eliminating of the tuition sensitivity rule for Pell, allowing the
neediest students to receive the maximum benefits at low-cost
institutions.
Legislative Issues:
FY06 Budget
Next steps:
Differing Senate and House budget
resolutions need to be reconciled
Approps committees need to work within
framework set by budget resolution
Authorizing committees need to consider
changes to HEA…
Legislative Issues:
Higher Education Act
• Congress is in the process of renewing the Higher
Education Act of 1965
• Legislation originally introduced last year by House
committee leadership has now been reintroduced
with minor revisions (HR 609), and formally
launched reauthorization process
• Senate committee plans to take up HEA in June
Senate GOP bill and ED legislative proposals not yet
released.
Bill will move slowly through Congress in 2005, and
may not be resolved until 2006
Legislative Issues:
Higher Education Act
• Central themes of reauthorization
include:
• Access and choice for students
• College cost and price
• Institutional accountability
• Administrative efficiency
College Access: Is Government Part of
the Solution or Part of the Problem?
• Provocative title of hearing held by House Ed &
Workforce Committee on April 19 with only two
witnesses:
• Richard Vedder, an economist who believes that
federal student aid artificially increases demand
and drives up prices
• Donald Heller, tried to debunk the notion that
increases in student aid lead to increases in
tuition and cited level of state appropriations and
investment performance as two tuition drivers
Accountability:
Sarbanes - Oxley Act
• Not directed at higher education—but trustees
will ask
• Major issues:
•
•
•
Financial statement certification
Audit committee
Auditor independence
• Only limited consulting allowed
• Partner rotation
• NACUBO on-demand web conference
available via NACUBO website
• NACUBO Advisory Report 2003-3
Accountability:
Sarbanes - Oxley Act
Key Points for Higher Education
• Not required
• Improved communications needed
• Increasing expectations concerning
accountability
• Reassess internal controls
NACUBO Advisory Report 2003-3
Why Developed
• Higher Education has many stakeholders
• Trustees share concerns of corporate boards
• Some states are considering variations for notfor-profit organizations
• Institutions must already adjust to revised GAO
independence standards (January 2003)
• Underwriting and pricing organizations consider
the act relevant to the tax exempt bond market
Accountability: Sarbanes
- Oxley Act
NACUBO Activities
• Survey to members on practices in
December 2004, see article in May BOM
for results
• 360 institutions responded; 73% have
read the Advisory Report
• SOX Summit with presidents and CFOs
coming up June 1
Regulatory Issues in 2005
• Department of Education
– New policy guidance on using stored value cards instead of
checks to pay Title IV aid to students
• Internal Revenue Service
– Student FICA rules finalized, took effect in April (web cast
available on demand)
• Department of Labor
– New overtime rules took effect last summer
• Department of Homeland Security
– Providing executive level emergency preparedness training
at a preconference before NACUBO annual meeting
– Tailored for higher education top executives, using FEMA
experience training state and local gov’t officials
Regulatory Issues:
Environmental Protection Agency
• EPA Sector Initiative – NACUBO and five
associations working with EPA HQ and regions
• Environmental Management Systems (EMS)
• Performance Measurement
• Regulatory Change (making great progress! with
proposed rule on hazardous waste for academic
labs only expected this year)
• Funding for a compliance assistance center for
colleges and universities in EPA FY05 budget
Environmental Health & Safety
• Asbestos Class Action Settlement
• Over $55M in settlements to be distributed
– Claims process will be governed by guidelines to be
approved by court
– Six-month window to file claims likely, possibly
starting in 2005
– What should institutions do?
• Start gathering information
• Complete pending asbestos abatement projects
• Rebate coupons available for W. R. Grace & Co.
products (see our web site)
Technology:
2005 Technology Issues
• Open source, KUALI Project now using the
new term “community source”
• Received funding from Mellon
2005 NACUBO Annual Meeting
BUILDING
ORGANIZATIONAL
CAPACITY
BALTIMORE,
MARYLAND
July 9-12, 2005
Thank You!